The present invention relates generally to methods of and systems for processing data pertaining to financial assets, such as loans, securities, and so forth, and more particularly to methods of and systems for evaluating an appraisal value associated with a loan.
The purchase of a home is typically the largest investment that a person makes. Because of the amount of money required to purchase a home, most home buyers do not have sufficient assets to purchase a home outright on a cash basis. In addition, buyers who have already purchased a home may wish to refinance their home. Therefore, potential homebuyers consult lenders such as banks, credit unions, mortgage companies, savings and loan institutions, state and local housing finance agencies, and so on, to obtain the funds necessary to purchase or refinance their homes. These lenders offer mortgage products to potential home buyers. The lenders who make (originate and fund) mortgage loans directly to home buyers comprise the “primary mortgage market.”
When a mortgage is made in the primary mortgage market, the lender can: (i) hold the loan as an investment in its portfolio, or (ii) sell the loan to investors in the “secondary mortgage market” (e.g., pension funds, insurance companies, securities dealers, financial institutions, and various other investors) to replenish its supply of funds. The loan may be sold alone, or in packages of other similar loans, for cash or in exchange for mortgage backed securities (MBS) which provide lenders with a liquid asset to hold or sell to the secondary market. By choosing to sell its mortgage loans to the secondary mortgage market for cash, or by selling the mortgage backed securities, lenders get a new supply of funds to make more home mortgage loans, thereby assuring home buyers a continual supply of mortgage credit.
The ability to assess the credit risk associated with a mortgage loan is important to the lender. A defaulted loan or a delinquent loan is costly to the owner of the asset (initially the lender in the primary mortgage market). Thus, the lender tries to avoid making loans in situations where there is a significant likelihood that the loan will later default or be delinquent. As a lender improves its ability to determine credit risk associated with a loan, the costs associated with lending go down. Fewer loans are given that default or become delinquent. In the secondary mortgage market, where mortgage loans are commonly sold to investors, fewer defaulted/delinquent loans results in a better return on investment, resulting in increased capital flow to the housing market. Better risk predictions, therefore, decrease the defaults/delinquencies, improve capital flow to the housing market, and ultimately decrease mortgage costs for consumers.
Mortgage loans originated by a lender (or alternatively a broker) are typically underwritten before being closed or prior to delivery (i.e., sale) to a purchaser in the secondary mortgage market. Although the final underwriting decision is made by the lender, the lender may submit a loan to an automated underwriting engine of the purchaser to obtain an indication whether the loan meets the credit risk and eligibility requirements of the purchaser based on a set of loan information provided by the lender. Such loan information typically includes borrower-specific risk factors, loan-specific risk factors, and property-specific risk factors. Borrower-specific risk factors may include factors such as the borrower's credit score, as well as other factors such as the borrower's income and financial reserves. Property-specific risk factors may include factors such as an appraisal value (e.g., submitted by the borrower). Loan-specific risk factors may include factors such as the loan-to-value ratio, the loan amount, the loan purpose, and so on.
Oftentimes during the underwriting process, and particularly with regard to assessing credit risk associated with a mortgage loan undergoing the underwriting process, a lender will need to assess the accuracy of loan information provided to the lender by a borrower. For example, the lender may need to assess the accuracy of an appraisal value submitted to the lender by a borrower in a refinancing transaction in order to determine whether the appraisal value submitted by the borrower is an accurate valuation or an excessive valuation of the particular property to be financed. While the lender may typically obtain a second independent appraisal value for comparison with the appraisal value submitted by the borrower, such as with an automated property valuation model, other loan information or characteristics may need to be considered when comparing the appraisal values in order to effectively identify lending transactions with potential excessive valuation issues.
Thus, there is need for a method of and system for evaluating an appraisal value associated with a loan that is configured to use loan information, such as foreclosure sale information or purchase money transaction information, to automatically identify lending transactions with potential excessive valuation issues. There is further need for a method of and system for evaluating an appraisal value associated with a loan that is configured to provide a message indicating that a potential excessive valuation issue exists for the lending transaction.